NZD/JPY skyrocketed yesterday, breaking above the medium-term downside resistance line drawn from the peak of the 23rd of January. The rally continued today, with the rate hitting resistance near the 75.55 barrier, which proved a strong resistance from the 21st of September until the 1st of October. The rate also trades above a tentative short-term uptrend line taken from the low of the 26th of October. In our view, all these suggest a positive near-term outlook.
That said, given how strong of a resistance the 75.55 zone was proven to be, we would like to see a clear move above that hurdle before we get confident on more advances. A break above 75.55 could initially pave the way for the 76.00 zone, marked by the intraday swing low of the 31st of July. Another break above that level could target the peak of that day, at around 76.30.
Taking a look at our short-term oscillators, we see that the RSI shows signs of topping within its above-70 zone, while the MACD, although above both its zero and trigger lines, has started to slow down. So, having these signs in mind, we would stay cautious of a possible setback before the next positive leg, perhaps for a test near the 75.05 level, or the crossroads of the 74.80 barrier and the aforementioned short-term uptrend line.
On the downside, we would like to see a clear break back below 74.35 before we start examining whether the bulls have abandoned the battlefield. Such a dip could confirm a dip below the short-term uptrend line and could signal the rate’s return back below the medium-term downside line drawn from the peak of the 23rd of January. The bears could initially aim for the 73.60 zone, the break of which could set the stage for the 73.20 barrier.
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